Dow Jones | December 15, 1999 | By Jerry Guidera
WASHINGTON - After nearly two years reviewing Monsanto Corp.'s bid to acquire rival Delta & Pine Land Co., Justice Department officials are prepared to let the deal unravel or block the merger in court if the two companies move to close it.
According to people close to the matter, Justice Department lawyers charged with reviewing the merger have raised substantial antitrust concerns about Monsanto's proposed $1.8 billion deal to acquire the Scott, Miss.-based cottonseed manufacturer. With the Dec. 31 closing date fast approaching, Delta & Pine officials reportedly unwilling to extend the final day once again, and Monsanto apparently reluctant to meet the government's demands, the deal is likely to fall through, the people said.
Company officials declined to comment on the matters. The Justice Department couldn't be reached for comment, but generally won't talk about ongoing investigations.
Federal regulators are concerned that the combined company's firm grip on the technology used to manufacture specialized seeds would give it a choke hold on the market for cottonseeds.
In addition, after more than 18 months looking into Monsanto and Delta & Pine's operations and poring over thousands of internal documents, Justice Department officials have widened their probe of the merger to include other acquisitions the two have made in recent years. Regulators also are checking to see if the two have already initiated talks on how the joint company would operate - a move that could violate antitrust rules.
The widened investigation comes at a difficult time for Monsanto and its line of genetically modified products. In addition to growing consumer rejection of the products, especially abroad, the St. Louis agribusiness giant was hit with a purported class-action lawsuit filed here in district court earlier this week. The suit alleges, among other things, that Monsanto's seed licensing practices give the company too much influence over prices charged to farmers.
Although the suit focuses on soybean and corn products, lawyers involved in the litigation say they are considering including allegations of collusion in the cottonseed market as well.
In the Delta & Pine review, Monsanto originally said it expected only minor antitrust concerns, perhaps leading to the divestiture of Monsanto's own cottonseed operations. Delta & Pine has control over some 70% of the market for cottonseed, while Monsanto's Stoneville Pedigree Seed Co. controls little more than 10% of the market.
In negotiations with the Justice Department, people close to the matter said, Monsanto signaled a willingness to shed its own cottonseed stake, but federal regulators wanted the company to relinquish control of the technology used to manufacture specialized seeds. So far, Monsanto appears unwilling to license the technology in order to win approval.
In a move that irked federal regulators, Monsanto went ahead and found a buyer for its Stoneville operations - Emergent Genetics Inc., a seed and biotech company controlled by Dallas-based buyout firm Hicks, Muse, Tate & Furst. In response, Justice Department officials issued an unusual third request for information - or Civil Investigative Demand - to probe allegations that Monsanto and Delta & Pine worked together on the divestiture and on other strategic plans for the combined company.
Furthermore, according to Delta & Pine company documents, federal regulators asked for all information related to any other recent acquisitions of seed concerns by either Monsanto or Delta & Pine that "are likely to have substantially lessened competition in the sale or development of cottonseed or cottonseed genetic traits."
Jerry Guidera, Dow Jones Newswires, 202-862-9275
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